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The magic of LNG

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Sparks About Gasshare

The magic of LNG

By Nicholas Newman

About gas

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The technology of turning gas into a liquid, transporting it by tanker, rail or truck and then converting it back into a gas is a bit like magic. But like all industrial innovations, it has human paternity and can be credited to two scientists: Godfrey Cabot, who patented a method of storing liquid gases at very low temperatures in 1915, and Lee Twomey, who patented the process of large-scale liquefaction in 1937. Their work laid the foundation for the subsequent commercialization of the process for converting natural gas into liquid natural gas (LNG)…

Odorless, colorless, non-toxic, non-corrosive and non-flammable, LNG is a form of methane gas chilled to about – 260 degrees Fahrenheit and colder than Antarctica on the winter solstice. LNG is compressed to 600 times its original volume and, like Doctor Who’s Tardis, a LNG tanker can store a greater volume than seems credible at first sight.

Facilitated by investment in large scale liquefaction export plants, dedicated tankers now deliver LNG to regasification facilities in worldwide import markets. LNG has grown rapidly in importance since the first shipments in 1964, reaching 10 percent of global natural gas consumption and 31 percent of worldwide natural gas trade today.

LNG is compressed to 600 times its original volume and, like Doctor Who's Tardis, a LNG tanker can store a greater volume than seems credible at first sight

LNG tankers cost around $200 million and are available for charter for periods of five years or more. The first commercial LNG tankers, the Methane Princess and Methane Progress, left Algeria for Britain and France in 1964. These first ships, fitted with Conch independent aluminum cargo tanks, had a capacity of 27,000 cubic meters and used LNG for fuel.

Of the 370 ocean-going LNG tankers currently in operation, 260 have steam turbines able to burn heavy fuel oil or boil-off gas. Another 60 are dual-fuel. Also, LNG tankers have grown in size — the largest in the Q-Max series reaches 345 meters in length, 53.8 meter in width and 34.7 meters in height and has a capacity of 266,000 cubic meters. Now there are also ship-to-ship LNG bunker vessels — small LNG tankers with a capacity of between 1,000 cubic meters and 3,000 cubic meters that deliver small quantities of LNG. Such shipments are suitable to serve the power needs of Indonesia and the Philippines’s many island communities.

The Netherlands Veka Group Develops Three New LNG Tankers

LNG Producers and Markets

Rising LNG production owes much to the increasing number of suppliers of natural gas particularly in Qatar, Oman, Australia, Malaysia, Nigeria, Indonesia and Norway. The US has also become a major LNG exporter based on the spectacular boom in unconventional shale oil and gas production. Until a recent slowdown, rising LNG output was meeting demand for gas by industry and power generators in Japan, China and South Korea. New markets for LNG, especially in Latin America, are this year being served by US LNG and nascent markets such as India, Pakistan and South Africa. The recent large investments in LNG tankers, liquefaction plants and regasification facilities has turned what was primarily a regional gas market limited by pipeline access, into a global market.

Export Liquefaction Terminals and increasing supply

From the first LNG export plant in Algeria, the number of operating liquefaction plants has grown to 40 shared amongst 20 countries with an estimated output of 270 MT. There are currently an additional 12 plants under construction of which, five are located in the US, including Cheniere Energy’s Sabine Pass with two of its six trains in operation. By the end of 2017 the five export plants are expected to liquefy 3.2 billion cubic feet a day, almost as much gas as NY state uses a day in 2015.

LNG Trade Routes

Other such plants around the world include San Vicente de Cañete in Peru, Gorgon in Australia and Ras Laffan in Qatar. Although LNG export plants can cost at least $30 billion each or $1.5 billion per 1 million metric tons annual capacity, more than 50 billion cubic meters per year of new LNG liquefaction capacity has been commissioned since 2014 at the peak of oil and gas prices. Not only have the number of export plants multiplied, innovation and economies of scale have driven up output from a single-train from 1 million metric tons per annum in 1960 to 5 million metric tons per annum in 2001. An ancillary development, “Floating liquefaction natural gas units” (FLNG) will further augment future LNG supplies.

In 2017, Petronas’s offshore Kanowit field near Sarawak in Malaysia and Shell’s Prelude and Concerto gas fields in the Browse LNG Basin off Australia will come online direct into a FLNG. Shell’s Prelude FLNG will be longer than four soccer fields. Notwithstanding capital costs of as much as $30 billion, KPMG, points out that FLNG technology is flexible, allowing access to smaller and more remote offshore reserves relatively cheaper and quickly with a reduced environmental footprint. Overall, new LNG capacity is expected to reach an additional 150 bcm by 2020 of which 90 percent will come from Australia and the US.

Demand for LNG

Natural gas is seen as the fuel of the future by BP, who predicts that gas will become the main fossil fuel by 2035 since it is cleaner than coal and oil, and is plentiful and affordable. Natural gas consumption by the electrical power sector is expected to increase until 2040 and the industrial and power generation sectors combined will account for 73 percent of the total increase in the world’s natural gas consumption predicts the IEA International Energy Outlook 2016. The current supply glut raises the question of which markets and sectors will absorb increasing amounts of LNG? Management consultants Mckinsey, forecast that Cuba, Morocco, South Africa and the Philippines will become new customers for LNG. See Figure 4. Already investors in Johannesburg and Manilla have put forward proposals to utilize Floating Storage and Regasification Units to supply their onshore power plants with gas.

Cheniere Energy - Sabine Pass First Cargo

Morocco, Egypt, Jordan, Kuwait and Dubai had a combined current import capacity of around 39.1 billion cubic meters at the start of 2016. In future years, Middle Eastern countries with rapid population growth, economic development plans, and need to conserve their oil and gas for export, represent a significant growing market for imports of LNG. Between February and early October 2016, 34 LNG cargoes left the Sabine Pass export plant, of which two thirds were destined for Latin American ports namely, Argentina, Brazil, Chile and Mexico. Columbia is expected to be a new buyer in 2017 when an FSRU is in place. However, owing to increased pipeline supply availability of US natural gas to Mexico, improved hydroelectric power generation in Brazil and shale development in Argentina, rising demand for LNG may be relatively short-lived.

Pakistan offers good prospects, since it is under pressure to meet rising demand for electricity and compensate for its declining local gas supplies. It is currently seeking bids for 60 cargoes through to 2020 and anticipates demand of 60 million tons of LNG by 2025 making it the second largest importer of LNG in the world after Japan. Imports will be facilitated by an existing FRSU, completion of three more in 2018, totaling 7 FRSUs in operation by 2020 with capacity to import 30 million tons a year. India’s transport sector is also a distinct possibility, since gas is competitive with more expensive gasoline and diesel, and running costs could be over 60 and 32 percent cheaper at current prices. As oil minister, Dharmendra Pradhan said on November 10, “ If we are able to convert heavy long-haul vehicles to run on LNG, it will help cut pollution and also lower costs.” Petronet LNG, India’s biggest importer of LNG and Indian Oil Corporation, a top fuel retailer, are currently trialling running long-haul buses fueled by LNG.

Regasification Terminals — Facilitating Imports of LNG

Approximately, 33 countries have regasification or LNG import terminals, according to The IGU (International Gas Union). Onshore terminals are expensive costing over $1 billion, of which construction accounts for around 35 percent. Examples of onshore facilities are the Grain Terminal near London, Gas Access to Europe (GATE) at Rotterdam and the Adriatic LNG Terminal near Venice. As of January 2016, 15 new terminals (of which, eight are located in China) are set to increase global import capacity by 73 million tons per annum by 2019.

As of January 2016, 15 new terminals (of which, eight are located in China) are set to increase global import capacity by 73 million tons per annum by 2019

A cheaper and recent innovation are floating regasification and storage units (FRSU), costing around $200 to $300 million, of which 20 units are currently in operation, most notably in Egypt, Italy and Chile, Jordan, Pakistan and Japan. For countries seeking fast LNG-to-power, FSRUs avoid the cost and planning permissions of a land-based facility since they can be chartered and towed into position.

It has taken LNG only fifty years to develop from a local product to one satisfying energy customer requirements worldwide. During that period, the technology has matured and adapted to meet changing energy market conditions. The industry now faces the challenge of tackling a global LNG surplus.

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